There's a new CEO at Microsoft but the old idea guy is coming back

Newly minted Microsoft CEO Satya Nadella has risen steadily over his 22-year tenure to arrive at the top, but it doesn't look like he's getting a lot of autonomy to shake things up.

Bill Gates, who steps down as chairman of the board as Nadella is promoted, assumes a new title: Founder and Technology Advisor. Microsoft says his role will necessitate devoting more time to the company, supporting Nadella in shaping technology and product direction.

What that means, Gates says in a video to welcome Nadella, is that he’s coming back to work, with plans to spend more than a third of his time meeting with Microsoft product groups.

What are the key areas? “There’s a challenge in mobile computing, there’s an opportunity in the cloud,” Gates says. “I’m thrilled that Satya has asked me to step up, substantially increasing the time that I spend at the company.”

Outgoing CEO Steve Ballmer took over for Gates in 2000, famously saying, "I'm not going to need him for anything. Use him, yes, need him, no." The company then went on to fall behind in mobile (Apple) and cloud (Amazon), and its stock price plummeted by more than a third. Despite that, the company became more and more profitable, with net income rising to $21.9 billion.

Nadella says in an email to Microsoft employees that he wants Gates’s advice: “I’ve asked Bill to devote additional time to the company, focused on technology and products.”

There’s no shame in asking Gates for advice, and it would be a mistake not to use such a valuable resource. Regardless it still must be intimidating to have a giant like Gates poking around among the troops and looking over your shoulder.

If that’s not enough, thanks to Ballmer’s organizational shake-up last year, Nadella is saddled with a corporate structure that has some high-ranking executives reporting to two bosses. For example, here’s Ballmer’s description of the role of Tony Bates, the former CEO of Skype, which is now part of Microsoft: “OEM will remain in [the sales marketing and services group] with Kevin Turner with a dotted line to Tony who will work closely with Nick Parker on key OEM relationships.”

This confusing hierarchy, which is still sorting itself out, will be a big drain on Nadella’s time. If he disagrees with choices Ballmer made, it will increase the period of confusion and productivity loss that such reorganizations bring.

Along with these internal pressures, Nadella faces the pending $7.2 billion acquisition of Nokia which not only brings the challenge of integrating a massive hardware operation into the company but also dealing with growing Microsoft’s headcount by 32,000, an increase of just about a third.

Nadella has to figure out just how Microsoft will handle itself as a new dealer in phones, tablets and hybrid phablets. The Microsoft’s Windows Phone 8 sales already lag far behind those of both Android and Apple phones, with Apple dominating the high end.

Meanwhile, the company is in the midst of reinventing itself as a purveyor of devices and services that rely on its cloud infrastructure to tie together phones, tablets, laptops, and gaming and entertainment hardware. It is working toward a better alignment of its operating systems so developers can reuse more code when they write apps for them. It is trying to embrace new Windows user interfaces such as touch and gestures without alienating customers familiar with the traditional Windows desktop. It is struggling to gain acceptance for its Surface devices - a blend of tablet and laptop – that tries to outdo the iPad.

These forays into selling hardware has strained relations with the OEM partners who have sustained Microsoft by licensing the software that runs on the hardware they build. This comes at a time when sales of traditional PCs are faltering, giving the OEMs less incentive to cater to Microsoft. Nadella has some diplomatic work ahead.

But he seems prepared to face the challenges with optimism and an eye toward innovation.

“There is no such thing as traditional because I think that this business of ours doesn’t respect tradition,” he said in an interview at the Le Web 2013 conference in December. “What it respects is whether you’re relevant and innovating in the future. … And as I said if you don’t have a real stake in the new then just surviving on the old - even if it is about [improving] efficiency - I don’t think is a long-term game.”

Tim Greene covers Microsoft and unified communications for Network World and writes the Mostly Microsoft blog. Reach him at tgreene@nww.com and follow him on Twitter@Tim_Greene.